- USD / JPY oscillates in a range during the early part of Wednesday’s trading action.
- The nervousness around covid-19 benefits the safe haven JPY and acts as a headwind for the pair.
- A rally in US bond yields offsets a modest USD weakness and provides support for the pair.
The pair USD/JPY lacks a firm directional bias and oscillates between lukewarm gains and minor losses, just above 109.50, during the European session on Wednesday.
A combination of factors has not helped the USD / JPY to capitalize on the previous day’s bounce from near the 109.00 level and has led to limited range price action on Wednesday. A softer tone around equity markets has supported the safe-haven Japanese yen. This, coupled with a modest weakness in the US dollar, has acted as a headwind for the pair.
Investors follow concerned that the rapid spread of the Delta variant of the coronavirus may lead to a global economic slowdown. This, along with political tensions in Afghanistan, has weighed on investor sentiment and benefited traditional safe-haven assets. That said, an expansion of the emergency phase in Tokyo and seven more prefectures have limited gains for the JPY.
Secondly, Diminishing odds of an early Fed policy tightening has kept USD bulls on the defensive and it has prevented investors from opening new bullish positions around the USD / JPY pair. However, a rally in US Treasury yields has continued to lend some support to the USD and has helped limit any significant declines for the USD / JPY pair, at least for now.
Investors also seem reluctant and prefer to wait on the sidelines before the release of the minutes of the FOMC meeting. Market participants will be looking for clues as to the likely time when the Fed will begin to reduce its asset purchases. This should play a key role in influencing USD price dynamics and providing new directional momentum to the USD / JPY pair.
USD / JPY technical levels
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